Setting aside some of your income in a savings account is not the only way to secure your family’s financial future. Life insurance is another option designed to meet that goal. It may give you a safety net if something happens to you that affects your ability to provide for you loved ones.
Understand Life Insurance
A life insurance policy pays an agreed amount of money to your beneficiaries in the event of your death. But it is important to note that “life insurance” is a broad term. There are two other types of coverage that it may include: Trauma Cover and Income Protection.
Trauma Cover is also sometimes referred to as Critical Illness Cover. It is a type of insurance that kicks in when the policyholder becomes unable to work due to a particular illness or injury. Payments are made to a policyholder who has been diagnosed with a serious medical condition. These include infirmities that require a lot of medical care such as those caused by stroke, cancer or an organ transplant.
Income Protection pays a set amount should a certain illness or injury render the policyholder unable to work. Income Protection may provide payments for up to two years, depending on the policy you choose. There’s Total and Permanent Disability (TPD) insurance too. This will provide continued payments to a policyholder who is completely incapacitated and therefore entirely unable to continue with any type of employment.
Who To Insure
Family members who financially contribute should consider protecting their incomes with life insurance. Their loved ones can then count on the assistance extended by the policy should misfortune happen and hinder their capacity to work. Some insurers now offer Family Life Insurance. This type of package covers not just the breadwinner, but even the stay-at-home parent and kids.
Level of Coverage
Every family will have different life insurance needs. Note down all your current and expected future living costs when deciding on the level of coverage to obtain to ensure adequate protection. Account for all your crucial expenses such as food, healthcare, credit card payments, mortgage, childcare, and schooling. This gives you a clearer picture of your family’s financial needs and can help you decide how much life insurance to get.
The bigger the payout and the more comprehensive the coverage, the more costly the premiums will tend to be. Bear in mind, though, that the best life insurance is not always the one with the highest payout. Think about what cover you need the most and how much of a premium your family’s budget can afford.
Life insurance has a handful of typical exclusions, restrictions and limitations just like any other insurance product. For instance, benefits may not be paid should your injury or death be due to participation in risky recreational activities. That means you may not be able to claim on your life insurance if, for example, you are injured while skydiving.
Some insurers may refuse payment if the policyholder dies within a set period after the policy issued. These conditions should be presented in detail in the product disclosure statement (PDS). It is very important to read this document carefully from start to finish.
Doing a full life insurance comparison online is a big task but doesn’t have to be too hard. Rates may vary greatly between insurers, but an online comparison will help you compare the rates side-by-side for the policies that interest you. You will also be able to conveniently comb through the product disclosure statements as well. With all the information to hand, you can seek out a life insurance package that will answer your family’s needs.
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